The first requirement for launching a successful sales and operations planning (S&OP) process is obtaining senior leadership buy-in, says Kris Hauer, vice president of global payment servicing with American Express Co. Often problems can crop up due to the failure of top executives to get cross-functional involvement. Of less importance is having sophisticated software tools at the outset. "Launch quickly and improve as you go," advises Hauer. "Get simple processes in place first."
Implementing S&OP in a retail environment can be especially challenging, says Hauer. Companies in that sector are dealing with a greatly extended supply chain, including providers of outsourced services, warehouses, third-party consolidators, retailers' distribution centers and stores. Companies need to ensure visibility and timeliness of information throughout that chain, in order to get products to market in the shortest possible time. "The more information you can get," Hauer says, "the better your process will run."
S&OP can be of great benefit to new-product launches. In its original form, the process initiates a monthly cycle that includes demand planning, forecasting, supply management and production scheduling. For new products, companies can shift to a weekly cycle, in order to keep up with changing market dynamics. By employing a greater frequency of planning, managers avoid the need to hold emergency meetings when unexpected developments occur.
American Express achieved its own success with S&OP when it launched a new gift card program. Hauer says the company was able to streamline operations and reduce exposure to excess inventory. More recently, it initiated a travel card for Brazil, employing a weekly planning cycle that could quickly react to unanticipated demand.
S&OP can be deployed across a product's complete lifecycle. As a product matures, managers can stretch out the planning cycle. In the case of American Express, demand for its popular Travelers Cheques is relatively stable, so that planners need only meet once a quarter to adjust the process, Hauer says.
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